Socal sees big dip in underwater mortgages

Just 9.8 percent of all mortgages in the L.A. area had negative equity as of the second quarter, down sharply from 29.8 percent during the second quarter of 2009 - arguably the worst stretch of the economic crisis. Even the Inland Empire, which was among the hardest hit real estate markets, has seen a major improvement, with 19.9 percent of its mortgages underwater, down from 58.6 percent in the April-June period in 2009. Numbers are courtesy of Lender Processing Services and the WSJ, which has a nifty interactive chart of how badly things got in various parts of the country and how many of those regions have improved. Portions of the northeast now have slightly higher underwater rates than Southern California. Higher home prices are largely behind the turnaround, though some analysts are not convinced that the percentage increases can be sustained. If nothing else, it's a reminder of how volatile Socal real estate can be. The current underwater capital is not from California - it's Rockford, Illinois with 32 percent of its mortgages in the hole. From the Journal's accompanying story:

When housing prices soared nationwide in the early 2000s, Rockford benefited. People unable to afford houses in Chicago, 90 miles away, bought homes here and some endured long drives to work, according to city officials and population statistics. The influx of people to Rockford slowed during the recession, and that still is weighing on the local housing market. Even as prices have rebounded in hard hit places like Phoenix, Las Vegas and Detroit, Rockford real estate has barely budged.

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Foreclosures are a big problem in Rockford, in particular because Illinois foreclosures are subject to a lengthy judicial process to protect the rights of homeowners. The result is a big backlog of distressed homes still working their way through the courts, pulling down property values.The city says it has about 5,400 vacant housing units, about 2,000 of which are abandoned or boarded up. Of course, the biggest shadow over the local housing market is the sickly Rockford economy.